So the title of Krugman’s latest article just made me laugh for a few minutes
“Keynes Was Right”
Might of well have been “I had a full frontal lobotomy.”
I’m not going to go over the whole article but I want to point out this genius little statement…
“So the real test of Keynesian economics hasn’t come from the half-hearted efforts of the U.S. federal government to boost the economy, which were largely offset by cuts at the state and local levels.”
What constitutes half-hearted?
$700 Billion for TARP
$7.77 TRILLION in secret loans from the Fed
Another 730 Billion in Stimulus already spent…all part of Obama’s 4 Trillion increase to the deficit…but let’s just count the stimulus to be fair.
So let’s see that’s about 9 Trillion Dollars in Stimulus. $9 Trillion dollars is half-hearted? What would be a serious attempt? Hey, we’re only 15 Trillion in debt…why don’t we spend $18 Trillion (because $9 Trillion is rather half-hearted) and by over doubling the debt that will solve all of our problems. It’s like when you don’t have enough money to pay the mortgage on your house, obviously the thing to do is buy another house. ? ? ? I’d say that Krguman was clearly on powerful psychedelics, but quite frankly I think people on an acid trip would still be able to see how stupid this is.
But oh wait, he said that was wiped out by states cutting their budgets…did you notice states collectively cutting their budget’s by 9 Trillion?
Hmmm…let’s take a look to see if this is true. If cutting costs led to worse economies than the states with the lowest debt rating would be the worst economies. So let’s take a look at the Atlantic’s (a fairly liberal resource) ranking of state economies vs. Forbe’s ranking of their debt (which includes current debt and unfunded future obligations. Of the Top 10 economies only one gets less that a 3 star rating in debt (#10 Hawaii) …and of the bottom 10 only 3 get higher than a 2 star rating. In fact the state with a highest economy rating but lowest debt rating of one star is Wisconsin (you know that place that recently drew a line in the sand over a lot of union BS). And the lowest state with a 4 star rating is Texas at 35 (it scores so low according to the Atlantic because of its low high school graduation rate…it’s like there is this constant influx of uneducated people who don’t speak the language coming into the state or something, I’m sure that has nothing to do with liberal federal policies)…
(Oh by the way I could have picked some other ranking of state economies which show that states do even better with low debt…but I thought I would go with the most biased numbers and still prove my point).
Also if Krugman was right then that would mean that California which never met an entitlement or tax it didn’t like should be doing great. And anyone who knows anything knows that state is currently riding in a hand basket for a destination that is currently unknown to the California state legislature, but known to everyone else.
So I’m not quite sure I buy his statement that state budget cuts erased the $9 Trillion dollars we pumped into the economy.
Also if he was right then a country as a whole would do well to spend and spend and spend and not worry about who would be paying for it…and then everything will be okay.
And it’s working so well in Greece…and Italy…and Spain.
But Keynesianism is working in China! Oh wait it’s not! They’re about to default on their debts too…and there is no one to bail them out.
So I guess spending when you don’t have money doesn’t ever work to actually save an economy. The fact of the matter is that Keynesian principles have never, ever, EVER been shown to work long term, will never work in the long term, and can never work in the long term. There is no case where they have not made the long term prospect worse. Yeah pumping money in might solve the problem for a very short time, like drinking red bull will keep you awake for a little while longer, but to truly be healthy a body needs sleep and an economy actually needs to go through the bust without interference.
But you know what, while Krugman is wrong in quoting Keynes in saying you should spend, spend, spend when you’re down and cut when you’re up (when in fact you should cut when you’re down and cut when you’re up because government should always be kept small), Keynes was right about one thing:
“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas.”
Little did Keynes know that the defunct economist in question was himself.